Appeal from the Circuit Court of McLean County; the Hon. James
A. Knecht, Judge, presiding.

JUSTICE TRAPP DELIVERED THE OPINION OF THE COURT:

Plaintiff brought this foreclosure action as a result of an alleged violation of the due-on-sale clause in defendant's mortgage. Defendant Bank of Illinois in Normal (Bank) was the borrower under the mortgage in its capacity as legal trustee in Land Trust No. BC-1. After an evidentiary hearing and filing of authorities by the various parties to litigation, Judge Knecht entered an order against plaintiff. Plaintiff's motion to vacate the judgment was denied after argument. Plaintiff appeals from the judgment of the circuit court of McLean County. We affirm.

McLean County Land Trust No. BC-1 was established on November 7, 1972, with the Bank as legal trustee and Banill Corporation as owner of the beneficial interest. On May 19, 1976, Banill Corporation assigned all of its beneficial interest in the land trust to Sharon Meyer. Sharon Meyer then signed a note with the Bank and executed a collateral assignment of her beneficial interest in this land trust to the Bank of Illinois to secure the indebtedness. On September 9, 1976, Tedd Meyer, Sharon Meyer's husband, executed an assignment of his beneficial interest in this land trust to Sharon Meyer. A second tract of land was added to Land Trust No. BC-1.

The mortgage which gave rise to this litigation was entered into on December 10, 1976. The Bank executed a note to plaintiff, a Federal savings and loan association, for $122,800, secured by a 20-year mortgage executed that date. The mortgage instrument lists the mortgagor-borrower as the Bank, as trustee under the provisions of McLean County Land Trust No. BC-1. Paragraph 17 of the mortgage, the due-on-sale clause, states:

"17. Transfer of the Property; Assumption. If all or any part of the Property or an interest therein is sold or transferred by Borrower without Lender's prior written consent, excluding (a) the creation of a lien or encumbrance subordinate to this Mortgage, (b) the creation of a purchase money security interest for household appliances, (c) a transfer by devise, descent or by operation of law upon the death of a joint tenant or (d) the grant of any leasehold interest of three years or less not containing an option to purchase, Lendor may, at Lendor's option, declare all the sums secured by this Mortgage to be immediately due and payable."

The accompanying note was executed by the Bank in its capacity as trustee, with Tedd and Sharon Meyer signing as guarantors. The mortgage was recorded.

On May 1, 1978, Sharon Meyer entered into a contract for deed with defendants Paul F. and Kathryn M. Oates for the real estate which was the subject of Land Trust No. BC-1. The contract for deed was secured by an agreement for warranty deed-deed in escrow arrangement.

On May 2, 1978, Sharon Meyer wrote to the Bank as trustee on Land Trust No. BC-1, directing the Bank to convey the property to the Oates upon completion of the terms of the contract for deed arrangement. She further directed the Bank to draw and sign a trust deed, sign the revenue declaration sheet, and hold these documents in escrow along with the contract for deed.

Under the terms of Meyer's contract with the Oates, the buyers were to pay the full remaining balance of the purchase price of $240,000 by May 1, 1979. The Meyer-Oates contract set forth options under which the Oateses could extend the time for payment in full as late as May 1, 1981. Apparently plaintiff was not notified of the contract for deed agreement or of the agreement for warranty deed-deed in escrow arrangement. Rather, plaintiff learned thereof upon receipt of an insurance policy on the property taken out by the Oateses.

Plaintiff sent Meyer an agreement under which plaintiff would consent to the transaction. This agreement included terms increasing the interest rate on the loan, requiring payment of a service charge for each of the "three years that the contract has to run," and a term requiring payment of the mortgage in full at the end of the three-year period. The Bank refused to sign the agreement with this "balloon" term. Plaintiff was aware of the Bank's position. A substitute agreement was signed by Meyers and the Bank and returned to plaintiff. The substitute agreement did not include the "balloon term," or any term reducing the 20-year period within which the mortgage was to be paid. The substitute agreement was received and read by plaintiff. Plaintiff made no objection to the substitute agreement, and accepted payment of the increased interest rate, the service charge and mortgage payments through May 1981. When the loan was not fully paid in May 1981, plaintiff refused to accept further payments and notified defendants it would seek foreclosure. Payments were subsequently placed into an escrow account.

Judge Knecht entered an order on December 21, 1982, finding as follows:

"1. The assignment of a beneficial interest in a land trust does not trigger a due on sale clause. The only interest Sharon Meyer could transfer was that of a beneficial interest in a land trust.

2. Any transfer or transfers that did occur did not violate the due on sale clause ...

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